If There's a Place, Time to Stem T-Note Slide, It's Here, Now

by RJO Market Insights

September 15, 2016 3:33AM CDT

Only a glance at the 240-min chart below is needed to see how fickle and volatile this market has been over the past month or so as traders react quickly and violently to whims and whiffs of economic data and how they might be considered by the Fed and the inevitable tightening. So we don't want to place too much emphasis on this morning's poke above Tue's micro corrective high at 130.255 that might simply be another in a month-and-a-half's string of aimless whipsaws. While Tue's129.26low remains intact however, a few compelling factors have development that suggest that IF the past couple months' sell-off attempt is just a BULL market correction, it's end may have been defined by this weeks low.

TO THIS POINT the sell-off attempt from 05-Jul's 133.00 high close has unfolded into only a 3-wave structure as labeled in the daily close-only chart above. Granted, PROOF of strength above 06-Sep's131.115smaller-degree corrective high and short-term risk parameter remains required to break the downtrend from even 29-Jul's 132.4 high, let alone 05-Jul's high.But it's compelling thatTue's 129.315 low came within a 32nd or two of BOTH the (130.00) 61.8% retrace of Apr-Jul's 128.045 - 133.00 rally AND the (130.02) 1.000 progression of Jul's initial 133.00 - 130.30 decline from 29-Jul's 132.04 high.

Additionally, the weekly chart below shows the market's current position relative to a TON of former 130-handle resistance that capped this market for more than a year that now serves as a huge new support condition. Furthermore, Tue's 129.26 low came within 2/32s of the 50% retrace of Nov'15 - Jul'16's 125.09 - 134.075 rally. If there's a place and time for the market to stem the past couple months decline as a correction and re-expose the secular bull, we believe it is here and now.

CLEARLY, we cannot conclude such a reversal higher and negation of our preferred major PEAK/reversal count from just the past couple days' spasm. And such an alternate bullish count would be jeopardized by a relapse below Tue's129.26low.But while that low remains intact as at least interim support, the facts cited above should beacknowledged as ones that could contribute to what would be a surprising and opportunistic move back up.

In sum, scalpers are OK to consider non-bearish action likes short-covers and cautious bullish punts as a result of yesterday and this morning's rebound with a relapse below 129.26 negating any base/reversal prospect and reinforcing our preferred long-term bearish count that, again, could produce lower T-note prices for a generation. Shorter-term traders and longer-term players remain advised to maintain a bearish policy and exposure with strength above at least 131.12 required to pare or neutralize this exposure. In effect, we believe the 129-3/4-area has become the latest KEY threshold and technical condition around the market needs to break to reinforce a major peak/reversal environment . From a 10-yr yield perspective shown in the weekly log close-only chart below, the1.75%level is considered that key toggle point that, if broken, could have historic repercussions.

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